MARKETING MANAGEMENT
12th edition
14
Developing Pricing
Strategies and
Programs
14-2
Chapter Questions
How do consumers process and evaluate prices?
How should a company set prices initially for
products or services?
How should a company adapt prices to meet
varying circumstances and opportunities?
When should a company initiate a price change?
How should a company respond to a competitor’s
14-3
Synonyms for Price
Rent
Tuition
Fee
Fare
Rate
Toll
Premium
Honorarium
Special assessment
Bribe
Dues
Salary
Commission
Wage
14-4
Common Pricing Mistakes
Determine costs and take traditional industry
margins
Failure to revise price to capitalize on market
changes
Setting price independently of the rest of the
marketing mix
Failure to vary price by product item, market
14-5
Consumer Psychology and Pricing
Reference prices
Price-quality inferences
Price endings
14-6
Table 14.1 Possible Consumer Reference Prices
“Fair price”
Typical price
Last price paid
Upper-bound price
Lower-bound price
Competitor prices
Expected future price
Usual discounted
14-7
Table 14.2 Consumer Perceptions vs. Reality for Cars
Overvalued Brands
Land Rover
Kia
Volkswagen
Volvo
Mercedes
Undervalued Brands
Mercury
Infiniti
Buick
Lincoln
14-8
Price Cues
“Left to right” pricing ($299 versus $300)
Odd number discount perceptions
Even number value perceptions
Ending prices with 0 or 5
14-9
When to Use Price Cues
Customers purchase item infrequently
Customers are new
Product designs vary over time
Prices vary seasonally
14-10
Steps in Setting Price
Select the price objective
Determine demand
Estimate costs
Analyze competitor price mix
Select pricing method
14-11
Step 1: Selecting the Pricing Objective
Survival
Maximum current profit
Maximum market share
Maximum market skimming
14-12
Step 2: Determining Demand
Price sensitivity
Estimating demand curves
14-13
Step 3: Estimating Costs
Types of Costs
Accumulated Production
Activity-Based Cost Accounting
14-14
Cost Terms and Production
Fixed costs
Variable costs
Total costs
Average cost
14-15
Step 5: Selecting a Pricing Method
Markup pricing
Target-return pricing
Perceived-value pricing
Value pricing
Going-rate pricing
14-16
Auction-Type Pricing
English auctions
Dutch auctions
14-17
Step 6: Selecting the Final Price
Impact of other marketing activities
Company pricing policies
Gain-and-risk sharing pricing
14-18
Price-Adaptation Strategies
Geographical pricing
Discounts/allowances
Promotional pricing
14-19
Price-Adaptation Strategies
Countertrade
Barter
Compensation deal
Buyback arrangement
Offset
Discounts/ Allowances
Cash discount
Quantity discount
Functional discount
Seasonal discount
14-20
Promotional Pricing Tactics
Loss-leader pricing
Special-event pricing
Cash rebates
Low-interest financing
Longer payment terms
Warranties and service contracts
14-21
Differentiated Pricing and Price Discrimination
Customer-segment pricing
Product-form pricing
Image pricing
Channel pricing
Location pricing
Time pricing
14-22
Increasing Prices
Delayed quotation pricing
Escalator clauses
Unbundling
14-23
Brand Leader Responses to Competitive Price Cuts
Maintain price
Maintain price and add value
Reduce price
Increase price and improve quality
